- 119 Company bakery-cafes converted to Panera 2.0 during Q4 2015, bringing total to 410

Ron Shaich, Chairman and CEO, commented, "Our strategic plan is working. Our comps of 3.6% in Q4 2015 and 6.4% in the first 41 days of Q1 2016 are leading indicators of the impact our initiatives are having. Further, we are confident that our results will continue to strengthen as the startup and transition costs associated with our initiatives begin to crest and our sales continue to grow. We now expect the EPS growth we saw in Q4 2015 will improve in 2016 and further accelerate in 2017. Today, we are confident we are on a path to return to sustained double-digit earnings growth."

Fiscal Q4 2015 and Full Year Fiscal 2015 Results and Business Review

Reported net income was $43 million, or $1.74 per diluted share, for fiscal Q4 2015. The fiscal Q4 2015 results compare to reported net income of $48 million, or $1.82 per diluted share, for fiscal Q4 2014. Excluding one-time items in both quarters (see table below), diluted EPS was $1.88 for fiscal Q4 2015 and $1.87 for fiscal Q4 2014, or up 1%. A reconciliation of GAAP and non-GAAP information is attached to this release as Schedule V.

Reported net income was $149 million, or $5.79 per diluted share, for full year fiscal 2015. The full year fiscal 2015 results compare to reported net income of $179 million, or $6.64 per diluted share, for full year fiscal 2014. Excluding one-time items in both fiscal years, diluted EPS was $6.21 for full year fiscal 2015 and $6.53 for full year fiscal 2014, or down 5%. A reconciliation of GAAP and non-GAAP information is attached to this release as Schedule V.

The Company's fiscal Q4 2015 and full year fiscal 2015 consolidated statements of income and margin analyses are attached to this release as Schedule I. The following table sets forth, for the periods indicated, certain items included in the Company's consolidated statements of income (in thousands, except per share data and percentages), including net income and diluted EPS, excluding charges related to the Company's refranchising initiative and goodwill impairment, and net income and diluted EPS, as reported:

Operating margin for full year fiscal 2015 declined approximately 130 basis points versus full year fiscal 2014, excluding charges related to the Company's refranchising initiative, as outlined in Schedule V. As reported, operating margin for full year fiscal 2015 declined approximately 190 basis points versus full year fiscal 2014.

New Bakery-Cafe Development and AWS

During fiscal Q4 2015, the Company opened 18 new bakery-cafes and its franchisees opened 15 new bakery-cafes. For full year fiscal 2015, the Company and its franchisees opened 112 new bakery-cafes (57 Company-owned and 55 franchise-operated). As a result, there were 1,972 bakery-cafes open system-wide as of December 29, 2015.

Company-owned

Franchise-operated

Total System

Bakery-cafes as of September 29, 2015

931

1,015

1,946

Bakery-cafes opened

18

15

33

Bakery-cafes closed

(3

)

(4

)

(7

)

Bakery-cafes refranchised

(45

)

45

—

Bakery-cafes as of December 29, 2015

901

1,071

1,972

Average weekly sales (“AWS”) for Company-owned "Class of 2015" bakery-cafes for full year fiscal 2015 was $45,357. AWS for franchise-operated "Class of 2015" bakery-cafes for full year fiscal 2015 was $48,711.

A schedule of fiscal Q4 2015 and full year fiscal 2015 AWS, including AWS information for bakery-cafes based on their designation as either a traditional or non-traditional bakery-cafe, is attached to this release as Schedule II. Non-traditional bakery-cafes refers to a range of alternate formats that the Company believes will allow it to more deeply penetrate existing and new territories with a range of different formats.

Panera 2.0 Conversions and Supplemental Information

As of fiscal Q4 2015, the Company had completed the conversion of 410 bakery-cafes to Panera 2.0, with 119 conversions completed during Q4 and 304 conversions completed year-to-date. The Company is releasing supplemental information, attached to this release as Schedule IV, detailing the performance of Company-owned bakery-cafes converted to Panera 2.0.

Share Repurchase

During fiscal Q4 2015, the Company repurchased 683,051 shares at an average price of $182.97 per share for an aggregate purchase price of approximately $125.0 million. During full year fiscal 2015, the Company repurchased a total of 2,201,719 shares at an average price of $181.65 per share for an aggregate purchase price of approximately $399.9 million. The Company has approximately $283.5 million available under the current $750 million repurchase authorization as of fiscal Q4 2015.

Initial Full Year Fiscal 2016 Outlook

Diluted EPS

The Company is targeting full year fiscal 2016 diluted earnings per share growth of 2% to 5% when compared to full year fiscal 2015 (comparative diluted earnings per share for full year fiscal 2015 excludes certain items as outlined on Schedule V).

The full year fiscal 2016 diluted earnings per share target range is based on the following key assumptions:

Comparable Net Bakery-Cafe Sales Growth

The Company is targeting Company-owned comparable net bakery-cafe sales growth for fiscal 2016 of 3.5% to 4.5%. The Company announced today that Company-owned comparable net bakery-cafe sales in the first 41 days of fiscal Q1 2016 were up 6.4%. Comparable net bakery-cafe sales in the first 41 days benefited from the fact that the Company took an earlier price increase in fiscal Q1 2016 than in fiscal Q1 2015 to better align with structural wage increases.

Operating Margin

The Company's fiscal 2016 diluted earnings per share target range assumes operating margin will be down 50 to 100 basis points when compared to fiscal 2015 which reflects startup and transition costs associated with our initiatives, excluding the impact of one-time charges.

New Bakery-Cafe Development and AWS

The Company's fiscal 2016 new bakery-cafe target is 90 to 100 system-wide bakery-cafe openings and the average weekly net sales performance target for new Company-owned bakery-cafes is $45,000 to $47,000.

Notes:

The Company will host a conference call that will be broadcast on the Internet at 8:30 A.M. Eastern Time on Wednesday, February 10, 2016, to discuss the fiscal Q4 2015 results, preliminary comparable net bakery-cafe sales results for the first 41 days of fiscal Q1 2016, full year targets and business outlook for fiscal 2016, and an update on the Panera 2.0 initiative. To access the call or view a copy of this release, go to http://www.panerabread.com/investor. Access to the call will be made available for 14 days, and the release will be archived for one year.

The Company includes in this release information on Company-owned, franchise-operated, and system-wide comparable net bakery-cafe sales percentages. Company-owned comparable net bakery-cafe sales percentages are based on net sales from Company-owned bakery-cafes included in base store bakery-cafes. Franchise-operated comparable net bakery-cafe sales percentages are based on net sales from franchised bakery-cafes, as reported by franchisees, that are included in base store bakery-cafes. Acquired Company-owned and franchise-operated bakery-cafes and other restaurant or bakery-cafe concepts are included in the Company's comparable net bakery-cafe sales percentages after it has acquired a 100 percent ownership interest and if such acquisition occurred prior to the first day of the Company's prior fiscal year. Comparable net bakery-cafe sales exclude closed locations.

The Company does not record franchise-operated net bakery-cafe sales as revenues. However, royalty revenues are calculated based on a percentage of franchise-operated net bakery-cafe sales, as reported by franchisees. The Company uses franchise-operated and net system-wide sales information internally in connection with store development decisions, planning, and budgeting analyses. The Company believes franchise-operated and net system-wide sales information is useful in assessing consumer acceptance of its brand; facilitates an understanding of its financial performance and the overall direction and trends of sales and operating income; helps the Company appreciate the effectiveness of its advertising and marketing initiatives which its franchisees also contribute based on a percentage of their net sales; and provides information that is relevant for comparison within the industry.

About Panera Bread Company

30 years ago, at a time when quick service meant low quality, Panera set out to challenge this expectation. We believed that food that was good and that you could feel good about, served in a warm and welcoming environment by people who cared, could bring out the best in all of us. To us, that is food as it should be and that is why we exist.

So we began with a simple commitment: to bake fresh bread from fresh dough in every bakery-cafe, every day. No artificial preservatives or short cuts, just bakers with simple ingredients and hot ovens. Each night, any unsold bread and baked goods were shared with neighbors in need.

These traditions carry on today, as we have continued to find ways to be an ally to our guests. That means crafting a menu of soups, salads and sandwiches that we are proud to feed our families. Like poultry and pork raised without antibiotics on our salads and sandwiches. A commitment to transparency and options that empower our guests to eat the way they want. Seasonal flavors and whole grains. And a commitment to removing artificial additives (flavors, colors, sweeteners and preservatives) from the food in our bakery-cafes. Why? Because we think that simpler is better and we believe in serving food as it should be. Because when you don’t have to compromise to eat well, all that is left is the joy of eating.

We’re also focused on improving quality and convenience. With investments in technology and operations, we now offer new ways to enjoy your Panera favorites - like mobile ordering and Rapid Pick-Up for to-go orders - all designed to make things easier for our guests. As of December 29, 2015, there were 1,972 bakery-cafes in 46 states and in Ontario, Canada operating under the Panera Bread®, Saint Louis Bread Co.® or Paradise Bakery & Cafe® names. For more information, visit panerabread.com or find us on Twitter (@panerabread), Facebook (facebook.com/panerabread) or Instagram (@panerabread).

Matters discussed in this news release and in our public disclosures, whether written or oral, relating to future events or our future performance, including any discussion, express or implied, regarding our intention to repurchase shares from time to time under the share repurchase program and the source of funding of such repurchases, our refranchising activities, our anticipated growth, operating results, plans, objectives, future earnings per share, and the impact of our investments in sales-building initiatives and operational capabilities on future sales and earnings, including Panera 2.0, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are often identified by the words "believe," "positioned," "estimate," "project," "target," "plan," "goal," "assumption," "continue," "intend," "expect," "future," "anticipate," and other similar expressions, whether in the negative or the affirmative, that are not statements of historical fact. These forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict, and you should not place undue reliance on our forward-looking statements. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those discussed from time to time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 30, 2014 and our quarterly reports on Form 10-Q. All forward-looking statements and the internal projections and beliefs upon which we base our expectations included in this release are made only as of the date of this release and may change. While we may elect to update forward-looking statements at some point in the future, we expressly disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Schedule I

PANERA BREAD COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(In thousands, except per share amounts)

For the 13 Weeks Ended

For the 13 Weeks Ended

December 29, 2015

December 30, 2014

Revenues:

Bakery-cafe sales, net

$

602,330

$

593,783

Franchise royalties and fees

39,611

33,736

Fresh dough and other product sales to franchisees

49,824

44,978

Total revenues

$

691,765

$

672,497

Costs and expenses:

Bakery-cafe expenses:

Cost of food and paper products

$

180,221

$

177,336

Labor

192,884

184,696

Occupancy

40,915

40,949

Other operating expenses

82,485

81,254

Total bakery-cafe expenses

496,505

484,235

Fresh dough and other product cost of sales to franchisees

42,545

38,425

Depreciation and amortization

35,231

33,428

General and administrative expenses

39,389

35,948

Pre-opening expenses

2,836

3,424

Refranchising loss

5,376

—

Total costs and expenses

621,882

595,460

Operating profit

69,883

77,037

Interest expense

1,564

438

Other (income) expense, net

244

2,759

Income before income taxes

68,075

73,840

Income taxes

24,932

25,348

Net income

43,143

48,492

Less: Net loss attributable to noncontrolling interest

(17

)

—

Net income attributable to Panera Bread Company

$

43,160

$

48,492

Earnings per common share:

Basic

$

1.75

$

1.82

Diluted

$

1.74

$

1.82

Weighted average shares of common and common equivalent shares outstanding:

Basic

24,703

26,581

Diluted

24,786

26,662

Schedule I (continued)

PANERA BREAD COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(In thousands, except per share amounts)

For the 52 Weeks Ended

For the 52 Weeks Ended

December 29, 2015

December 30, 2014

Revenues:

Bakery-cafe sales, net

$

2,358,794

$

2,230,370

Franchise royalties and fees

138,563

123,686

Fresh dough and other product sales to franchisees

184,223

175,139

Total revenues

$

2,681,580

$

2,529,195

Costs and expenses:

Bakery-cafe expenses:

Cost of food and paper products

$

715,502

$

669,860

Labor

754,646

685,576

Occupancy

169,998

159,794

Other operating expenses

334,635

314,879

Total bakery-cafe expenses

1,974,781

1,830,109

Fresh dough and other product cost of sales to franchisees

160,706

152,267

Depreciation and amortization

135,398

124,109

General and administrative expenses

142,904

138,060

Pre-opening expenses

9,089

8,707

Refranchising loss

17,108

—

Total costs and expenses

2,439,986

2,253,252

Operating profit

241,594

275,943

Interest expense

3,830

1,824

Other (income) expense, net

1,192

(3,175

)

Income before income taxes

236,572

277,294

Income taxes

87,247

98,001

Net income

149,325

179,293

Less: Net loss attributable to noncontrolling interest

(17

)

—

Net income attributable to Panera Bread Company

$

149,342

$

179,293

Earnings per common share:

Basic

$

5.81

$

6.67

Diluted

$

5.79

$

6.64

Weighted average shares of common and common equivalent shares outstanding:

The following table sets forth the percentage relationship to total revenues, except where otherwise indicated, of certain items included in the Company's consolidated statements of income for the period indicated. Percentages may not add due to rounding:

For the 13 Weeks Ended

For the 13 Weeks Ended

December 29, 2015

December 30, 2014

Revenues:

Bakery-cafe sales, net

87.1

%

88.3

%

Franchise royalties and fees

5.7

5.0

Fresh dough and other product sales to franchisees

7.2

6.7

Total revenues

100.0

%

100.0

%

Costs and expenses:

Bakery-cafe expenses (1):

Cost of food and paper products

29.9

%

29.9

%

Labor

32.0

31.1

Occupancy

6.8

6.9

Other operating expenses

13.7

13.7

Total bakery-cafe expenses

82.4

81.6

Fresh dough and other product cost of sales to franchisees (2)

85.4

85.4

Depreciation and amortization

5.1

5.0

General and administrative expenses

5.7

5.3

Pre-opening expenses

0.4

0.5

Refranchising loss

0.8

—

Total costs and expenses

89.9

88.5

Operating profit

10.1

11.5

Interest expense

0.2

0.1

Other (income) expense, net

—

0.4

Income before income taxes

9.8

11.0

Income taxes

3.6

3.8

Net income

6.2

7.2

Less: Net loss attributable to noncontrolling interest

—

—

Net income attributable to Panera Bread Company

6.2

%

7.2

%

(1) As a percentage of net bakery-cafe sales.

(2) As a percentage of fresh dough and other product sales to franchisees.

The following table sets forth the percentage relationship to total revenues, except where otherwise indicated, of certain items included in the Company's consolidated statements of income for the period indicated. Percentages may not add due to rounding:

For the 52 Weeks Ended

For the 52 Weeks Ended

December 29, 2015

December 30, 2014

Revenues:

Bakery-cafe sales, net

88.0

%

88.2

%

Franchise royalties and fees

5.2

4.9

Fresh dough and other product sales to franchisees

6.9

6.9

Total revenues

100.0

%

100.0

%

Costs and expenses:

Bakery-cafe expenses (1):

Cost of food and paper products

30.3

%

30.0

%

Labor

32.0

30.7

Occupancy

7.2

7.2

Other operating expenses

14.2

14.1

Total bakery-cafe expenses

83.7

82.1

Fresh dough and other product cost of sales to franchisees (2)

87.2

86.9

Depreciation and amortization

5.0

4.9

General and administrative expenses

5.3

5.5

Pre-opening expenses

0.3

0.3

Refranchising loss

0.6

—

Total costs and expenses

91.0

89.1

Operating profit

9.0

10.9

Interest expense

0.1

0.1

Other (income) expense, net

—

(0.1

)

Income before income taxes

8.8

11.0

Income taxes

3.3

3.9

Net income

5.6

7.1

Less: Net loss attributable to noncontrolling interest

—

—

Net income attributable to Panera Bread Company

5.6

%

7.1

%

(1) As a percentage of net bakery-cafe sales.

(2) As a percentage of fresh dough and other product sales to franchisees.

[b] Represents year-to-date bakery-cafe openings and AWS for fiscal 2015 and fiscal 2014. Traditional bakery-cafes generally represent bakery-cafes opened in suburban geographies approximating our standard 4,200 square foot design. Non-traditional bakery-cafes reflect all other bakery-cafes including urban, small footprint formats, and delivery units. Because the non-traditional bakery-cafe designation covers various formats and the formats of non-traditional bakery-cafe openings may vary from period-to-period, comparing AWS for non-traditional bakery-cafes on a year-over-year basis may not be meaningful.

The schedule below and image linked above detail certain operating metrics for base Company-owned bakery-cafes converted to the Panera 2.0 format as of December 29, 2015. Panera 2.0 is our strategic initiative designed to enhance the customer experience that is enabled by technology and operational improvements. The operating metrics presented in this schedule, as defined in the footnotes below, reflect certain components of the items presented in the Company's consolidated statements of income, included in this release as Schedule I.

Comps in 2.0 Bakery-Cafes by Quarters Since Conversion

Number of quarters since conversion (1)

1

2

3

4

5

6

7

8

9

10

Bakery-cafe count (2)

314

221

138

98

81

37

18

13

13

7

Absolute cumulative comp (3)

3.3

%

4.7

%

5.4

%

7.6

%

9.7

%

16.1

%

11.0

%

16.2

%

19.5

%

25.6

%

(1) Reflects performance for each successive, three month period following the completion of the Panera 2.0 conversion process. Most recent quarter could represent a partial quarter for some bakery-cafes.(2) Company-owned bakery-cafes converted to Panera 2.0 that are in the comp base, originally open in fiscal 2012 or prior.(3) "Absolute cumulative comp" defined as the cumulative percentage increase in the retail gross sales compared to the same period in the fiscal year prior to the completion of the Panera 2.0 conversion. Retail gross sales excludes catering sales.

The Company uses diluted earnings per share excluding certain items as a key performance measure of results of operations for purposes of evaluating performance internally. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of results excluding certain items provides additional information to facilitate the comparison of past and present operations, excluding items described below that the Company does not believe were indicative of our ongoing operations in the 13 and 52 weeks ended December 29, 2015 and December 30, 2014, respectively.

For the 13 Weeks Ended

For the 52 Weeks Ended

December 29, 2015

December 29, 2015

Net income, as reported

$

43,160

$

149,342

Refranchising loss, after-tax (1)

3,407

10,778

Net income, excluding certain items

$

46,567

$

160,120

Diluted earnings per share, as reported

$

1.74

$

5.79

Impact of refranchising loss on diluted earnings per share

0.14

0.42

Diluted earnings per share, excluding certain items

$

1.88

$

6.21

For the 13 Weeks Ended

For the 52 Weeks Ended

December 30, 2014

December 30, 2014

Net income, as reported

$

48,492

$

179,293

Goodwill impairment charge, after-tax (2)

1,351

1,351

Favorable tax adjustments (3)

—

(2,319

)

Favorable resolution of insurance coverage matter, after-tax (4)

—

(2,049

)

Net income, excluding certain items

$

49,843

$

176,276

Diluted earnings per share, as reported

$

1.82

$

6.64

Impact of goodwill impairment charge on diluted earnings per share

0.05

0.05

Impact of favorable tax adjustments on diluted earnings per share

—

(0.08

)

Impact of favorable resolution of insurance coverage matter on diluted earnings per share

—

(0.08

)

Diluted earnings per share, excluding certain items

$

1.87

$

6.53

(1) Refranchising loss of $5.4 million and $17.1 million before net effective tax benefits of $2.0 million and $6.3 million recorded during the thirteen and fifty-two weeks ended December 29, 2015, respectively.(2) Goodwill impairment charge of $2.1 million before net effective tax benefit of $0.7 million recorded during the thirteen weeks ended December 30, 2014 in other (income) expense, net in the Consolidated Statements of Income.(3) Favorable tax adjustments of $2.3 million related to additional federal tax credits and an increased deduction for domestic production activities related to prior period income tax returns recorded during the thirteen weeks ended September 30, 2014.(4) Benefit from a favorable resolution of an insurance coverage matter of $3.2 million before net effective tax expense of $1.2 million recorded during the thirteen weeks ended July 1, 2014.